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Report of the Estate Planning, Trust and Probate Law Section

To the Council of Delegates:

The OSBA Estate Planning, Trust and Probate Law Section respectfully requests your favorable consideration of the following three legislative proposals, marked as exhibits A, B, and C.

A. A proposal granting authority to the Probate Court to determine the fairness of a contract with an "heir hunter."

B. A proposal to make the Trustee for Absentee and Presumed Decedents’ statutes consistent with one another.

C. A proposal to create a series of presumptions with regard to the creation of joint and survivorship bank accounts.

Respectfully submitted,
Andrew L. Fabens, III, Cleveland
Chair


Exhibit A

The Estate Planning, Trust and Probate Law Section Board of Governors recommends to the Council of Delegates a proposal to add a new section 2109.361 to the probate code. The beneficiaries of Ohio estates and trusts whose beneficiaries are determined by reference to the Ohio statute of descent and distribution have become the unfortunate targets of a class of entrepreneurial genealogists referred to as "heir hunters." Without authority of the probate court or that of the fiduciary administering the estate or trust, these heir hunters identify and contact beneficiaries. Typically, they persuade them to sign contingent fee contracts providing compensation to the heir hunter of as much as 40 percent of the beneficiary’s inheritance and purporting to assign that percentage of the inheritance to the heir hunter. The beneficiary is not told of the decedent’s identity or an accurate probable value of the inheritance. In exchange for this percentage, the heir hunter agrees to establish with the court the validity of the beneficiary’s claim of inheritance at the heir hunter’s expense, including attorney fees.

In effect, the heir hunter competes with the court and the fiduciary. A fiduciary is duty bound to locate the heirs, determine the amount of inheritance and, if necessary, hire an investigator versed in genealogy. Investigators hired by fiduciaries customarily work on an hourly rate, time spent basis and not for a percentage of the inheritance. This work of the fiduciary should be conducted as part of the cost of estate administration, which indirect cost to the beneficiary would be far less than the heir hunter’s percentage.

The proposed statute authorizes an interested party, in most cases the beneficiary or the fiduciary, to apply to the probate court to determine the fairness of a contract with an heir hunter. When an application is filed, the court must conduct a hearing to determine the fairness and, after hearing, may approve, modify or invalidate the contract. Once the application is filed, the fiduciary may not honor any assignment providing for direct payment to the heir hunter without court approval. Without the proposed legislation, a beneficiary seeking relief from a contract must sue the heir hunter and then have the difficult task of persuading a court that the contract should not be enforced.

Respectfully submitted,
Andrew L. Fabens, III, Cleveland
Chair

Proposed new Ohio Revised Code section regarding third-party distributions
Section 2109.361. Distribution of an inheritance to person other than beneficiary; court inquiry; disallowance or notification of distribution; grounds; notice of hearing.
(A) This section applies where distribution of the assets of an estate or trust held by a fiduciary is to be made to any of the following persons that is not a beneficiary of such estate or trust:
(1) The transferee of a beneficiary.
(2) Any person pursuant to an agreement, request, or instruction of a beneficiary or
pursuant to a legal claim against a beneficiary.

(B) This section applies to any distribution of assets described in division (A) that is the subject of an agreement between a beneficiary and any person whereby a percentage of an inheritance or a dollar amount is required to be paid to any person other than the beneficiary. For purposes of this section, such a distribution is referred to as a "third-party distribution".

(C) Permissive Filing. Prior to making any such third-party distribution, an application for approval of such third-party distribution may be filed with the probate court by the fiduciary or by an interested person. Any such application filed pursuant to this division (C) shall identify the person to whom such third-party distribution is to be made, shall disclose the basis for making such third-party distribution and shall include a copy of any written agreement between the affected beneficiary and such person.

(D) Fiduciary Liability and Waiver. If a third-party distribution is made by a fiduciary without the prior approval of the probate court, such fiduciary shall be personally liable to the affected beneficiary, up to the full amount of such third-party distribution, unless:

(1) such beneficiary waives such fiduciary liability or consents to such third-party distribution, in writing directly to such fiduciary; or

(2) such third-party distribution is disclosed on a fiduciary accounting filed with the probate court, with notice of such accounting to such beneficiary, and such beneficiary fails to file exceptions to such third-party distribution

A fiduciary’s liability under this division (D) may be reduced or eliminated to the extent that the fiduciary establishes to the satisfaction of the court that the amount and allocation of such third-party distribution was just and equitable under the circumstances. The court shall review the agreement that gave rise to such third-party distribution in the same manner as if an application had been filed prior to such third-party distribution pursuant to division (C).

(E) Hearing. The probate court shall hold a hearing on an application filed under division (C). Notice of the hearing shall be served on all interested parties at least fifteen (15) days prior to such hearing, in such manner as may be ordered by the probate court. Any notice that is required or permitted by this section shall be served, and the right to receive any notice may be waived, in accordance with the Rules of Civil Procedure.

(F) The probate court may find the agreement that is the subject of an application filed under division (C) to be invalid and unenforceable, in whole or in part, or the probate court may approve such third-party distribution in whole or in part, as the court deems just and equitable. Further, to the extent such application is approved, the probate court also shall determine whether such third-party distribution properly is charged solely against such beneficiary’s share or whether some part or all of such third-party distribution properly is charged against the residue of the affected estate or trust. Without limitation, the probate court may consider any or all of the following factors in evaluating such an application:

(1) The amount or percentage of the affected beneficiary’s share that would be the subject of the proposed third-party distribution, measured against the reasonable value of any goods or services provided to the beneficiary (or to the estate or trust) by the person to whom such third-party distribution would be made; and

(2) Whether the agreement, request or instructions of the affected beneficiary were procured by duress, fraud, misrepresentation, undue influence or otherwise by unfair means.


Exhibit B

Proposed amendment to update ORC §§2119.01, 2119.03, 2121.02, 2121.06

The Board of Governors of the Estate Planning, Trust and Probate Law Section has reviewed the Trustee for Absentee statutes (ORC Chapter 2119) and the Presumed Decedents’ Law (ORC Chapter 2121) to make certain the statutes are consistent with each other, and to determine whether updating is needed. We had not examined these particular statutes for several decades.

We found that Chapter 2119 refers to payments by a trustee to "dependents" of a missing person. We changed the "dependents" language to "those persons the absentee is legally obligated to support" to make it clearer and to make it consistent with the statutes applicable to presumed decedents.

We also removed masculine pronouns and updated statutory cross-references in both chapters.

Respectfully submitted,
Marilyn J. Maag, Cincinnati
On behalf of the Missing Person/Trustee for Absentee Committee

The recommended changes are as follows:
Chapter 2119: Trustee for absentee
§2119.01 Trustee for absentee.

When a person owning property in this state has disappeared and has not been heard from, after diligent inquiry and for at least three months, under circumstances that afford reasonable ground to believe that he the absentee is dead, cannot return, or refused to return to his home, and his the absentee’s estate requires attention, supervision, and care, or is needed for the maintenance of his dependents those persons the absentee is legally obligated to support, the probate court may, on application of the spouse or of one of the next of kin, appoint a trustee to take possession and charge of the property of such person, other than the property with respect to which such person has made provision by written instrument designating an agent or attorney in fact. Such application shall be filed in the county in which such person last resided or if his the absentee’s last known residence was without this state, such application may be filed in any county in which such property is situated.

§ 2119.03 Powers of trustee.
The trustee appointed under section 2119.01 of the Revised Code may proceed without order of the probate court:

(A) To take possession of the property of the absentee wherever situated within the state;

(B) To collect all debts due to the absentee;

(C) To retain and invest the estate in accordance with Chapter 2113. to 2125. Sections 1339.52 through 1339.61 of the Revised Code.

The Trustee may pay such part or all of the income or principal of the estate as the court, from time to time, may direct for the maintenance and support of the absentee’s dependents those persons the absentee is legally obligated to support and, under the order of the court, may bring and defend suits on behalf of the absentee, compromise claims in favor of and against the absentee, and pay such debts of the absentee as the court finds necessary for the protection of his dependents those persons the absentee is legally obligated to support, including insurance premiums, orders for an award of spousal support, and other obligations. The court may make such other orders as it deems proper for the care and custody of the property and its proceeds.

Chapter 2121: Presumed decendents’ law
§ 2121.02 Proceedings in case of presumption of death.
(A) When such a presumption of death arises under section 2121.01 of the Revised Code with respect to a person who at the time of disappearance was domiciled in this state, the attorney general of this state or any person entitled under the last will of such presumed decedent or under sections 2105.06 to 2105.21 2105.39 of the Revised Code to any share in the presumed decedent’s property within this state, or any person or entity who, under the terms of any contract, beneficiary designation, trust, or otherwise, may be entitled to any property, right, or interest by reason of the death of the presumed decedent, may file a complaint setting forth the facts which raise the presumption of death in the probate court of the county of the presumed decedent’s last residence.

(B) When a presumption of death arises pursuant to section 2121.01 of the Revised Code with respect to a person who at the time of his disappearance was domiciled at a place other than within the state, and the presumed decedent owns real property within this state, the complaint may be filed in the county where any part of the real property of the presumed decedent is located by any of the persons or entities referred to in division (A) of this section, or by any domiciliary executor or administrator of the decedent. A foreign fiduciary shall include with the complaint an exemplified copy of the domiciliary proceedings pursuant to which the foreign fiduciary was appointed.

(C) In the case of a presumed decedent who was domiciled in this state, the complainant shall name as parties defendant the presumed decedent and each of the following that do not join in the complaint:

(1) The presumed decedent’s surviving spouse, if any;

(2) All persons known to the complainant who are entitled under the presumed decedent’s last will and all persons who are entitled under sections 2105.06 to 2105.21 2105.39 of the Revised Code to any share of the presumed decedent’s property;

(3) All persons or entities known to the complainant who have or would have by reason of the presumed decedent’s death any right or interest under any contract, beneficiary designation, trust, or otherwise;

(4) All contract obligors known to the complainant whose rights or obligations would be affected by a determination that the presumed decedent is in fact dead.

(D) In the case of a presumed decedent who was not domiciled in this state but who owned real estate in this state, the complainant shall name as parties defendant each of the following that do not join in the complaint:

(1) The presumed decedent’s surviving spouse, if any;

(2) All persons known to the complainant who are entitled under the presumed decedent’s last will and all persons who are entitled under sections 2105.06 to 2105.21 2105.39 of the Revised Code to any share of the presumed decedent’s real property within this state.

(E) All parties defendant, other than the presumed decedent, shall be served with summons in the same manner as provided by the Rules of Civil Procedure.

(F) The complainant shall cause to be advertised once a week in four consecutive weeks in a newspaper published in the county, the fact that the complaint has been filed together with a notice that on a day certain, which shall be at least four weeks after the last appearance of the advertisement, or after the final publication where any defendant is being served by publication, whichever is later, the probate court will hear evidence relevant to the allegations of the complaint.

(G) No guardian ad litem, trustee for the suit, or other representative shall be required to be appointed to represent the presumed decedent in the proceeding.

§ 2121.06 Descent of real estate.
Upon the signing of the decree establishing the death of the presumed decedent, the real estate of the presumed decedent passes and devolves as in the case of actual death and the persons entitled by will, or under sections 2105.01 to 2105.21 2105.39 of the Revised Code, may enter and take possession. Persons taking the real estate may sell or mortgage it and the purchaser or mortgagee takes a good title, free and discharged of any interest or claim of the presumed decedent. The persons taking such real estate shall not sell, convey, or mortgage any part thereof within the three-year period specified in section 2121.08 of the Revised Code without first giving bond in an amount to be fixed by the probate court and with sureties to be approved by the court. In the discretion of the court the bond may be taken without sureties. Such bond shall be conditioned to account for and pay over to the presumed decedent, in case within the three-year period after the decree is entered by the court it is established that the presumed decedent is still alive, the value of the real estate sold or conveyed, or in the case of the making of a mortgage, to pay the amount of the mortgage and interest thereon, or in case of a foreclosure of such mortgage, to account for and pay over the value of the real estate mortgaged.


Exhibit C
Proposal to enact new ORC §2131.12 pertaining to joint and survivorship bank accounts

The Board of Governors of the Estate Planning, Trust and Probate Law Section has been wrestling with the problems created by joint and survivorship bank accounts for at least twenty years. All trust and estate practitioners have dealt with the issue as to whether the decedent depositor who creates a joint account with another person with provisions of survivorship really intended the other person to own the account at death. Under the holding of In Re Thompson (1981), 66 Ohio St. 2d 433 the estate of a decedent had the opportunity to prove by clear and convincing evidence that the decedent did not intend to create a survivorship interest in establishing an account. Much litigation ensued. The Supreme Court in an effort to end the litigation overruled Thompson when it held the opening of a joint and survivorship account in the absence of fraud, duress, undue influence or lack of capacity on the part of the decedent is conclusive evidence of his or her intention to transfer to the surviving party a survivorship interest in the account. Wright v. Bloom (1994), 69 Ohio St. 3d 596. Litigation may have been reduced but, in the opinion of many practitioners, at the expense of more injustices.

In 1994 the EPTPL (then Probate and Trust) Section proposed enaction of the Uniform Multiple Party Accounts Act, a comprehensive treatment of all aspects of bank accounts. The OSBA Council of Delegates supported the recommendation and a bill to enact the same was introduced. It has languished due to opposition of the Ohio Bankers Association. It is beyond the object of this report to comment on the merits of the Act or the opposition to it.

The Board is now recommending a simplified approach that attempts to determine the real intent of the depositor when such an account is opened. The depositor would be asked to answer yes or no to the question of whether he or she intends to have the "co-owner" own the account at death. If the answer is yes, it shall be irrebuttably presumed that the depositor intends to create a survivorship interest in the account in the absence of fraud, duress, undue influence or lack of capacity. If the answer is no, there is an irrebuttable presumption to the contrary. If the question is not answered, the decedent’s estate has the opportunity to prove by the preponderance of the evidence that the intention was not to create a survivorship interest. Wright v. Bloom would be superceded.

Provision is made to protect financial institutions that make distributions from the account to the survivor in the absence of actual notice from the decedent’s personal representative that such payments should not be made.

We are not under the illusion that this proposal will be a panacea but we believe it represents an improvement over current law.

ORC §2131.13
A. As used in this section:

(1) "Account" means contract or deposit between a depositor and a financial institution, including a checking account, savings account, money market account, certificate of deposit and share account.

(2) "Financial Institution" means an organization authorized to do business under state or federal laws relating to financial institutions and includes a bank, trust company, savings bank, savings and loan association and credit union.

B. An account in the name of two or more persons may provide that upon the death of one person the contract of deposit is payable to the survivor or survivors of them. The contract creating the account shall provide the depositor the opportunity to affirmatively signify his or her intention as to the disposition of the account at death by containing the following question and the depositor’s signature.

Do you want the named co-owner(s) to own the account at your death?
Yes______ No______ ________________________________
Signature of Depositor

C. If the answer to the question in Division (B) is yes, the sums on deposit in the account at death belong to the surviving party or parties on the account and it shall be irrefutably presumed that the depositor intended to create a survivorship interest in the account in the absence of fraud, duress, undue influence or lack of capacity of the depositor. If the answer to this question is no, it shall be irrefutably presumed that the depositor did not intend to create a survivorship interest in the account. If the question is not provided in the contract or not answered, the sums on deposit in the account at death belong to the surviving party or parties on the account in the absence of fraud, duress, undue influence or lack of capacity unless there is a preponderance of evidence of a different intent.

D. A payment made from an account by a financial institution pursuant to this section to the surviving party or parties on the account discharges the financial institution from all claims for amounts so paid unless the financial institution has received written notice from the personal representative of a deceased party to the account, that the financial institution should not make payments in accordance with the terms of the account, and the financial institution, when the payment is made, has had a reasonable opportunity to act on the written notice.

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